Leveraging global experience

As superannuation funds seek to adjust to regulatory change and to deal with a wider range of asset classes, the global reach of some custodians is paying dividends. 

Amid the increasingly competitive environment impacting the Australian custody industry, BNP Paribas Securities Services has proved more than willing to leverage its international experience and capability. 

BNP Paribas Securities Services Australian head, David Braga, believes that the changing regulatory environment within Australia, combined with the desire of superannuation funds to bring elements such as investment and asset allocation in-house have provided opportunities for companies such as BNP. 

He cites as an example the company’s capability with respect to over-the-counter (OTC) derivatives and the manner in which this has gelled with impending changes to the Australian regulatory environment. 

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Under those proposed changes, contained in  Treasury draft regulations for Phase 3 B reporting entities, more fund trustees would have to review their reporting practices with respect to OTC derivatives.  (Phase 3B entities are those with broad exposure of less than A$5 billion to OTC derivatives). 

The proposed new reporting requirements would see a split between Australian and foreign counterparties so that when trading with a foreign counterparty to be eligible for the exemption, a super fund must broadly:   

• transact with a counterparty that is subject to the reporting requirements that are “substantially equivalent ” to the Australian Securities & Investments Commission’s (ASIC) reporting requirements;  
• the counterparty reports transaction per the requirements and to a prescribed repository and;   
• tag the trade as an ASIC trade.    

BNP Paribas was quick to recognise that under the proposed regime, asset owners and managers were facing increased compliance to meet the reporting requirements and that, additionally, there would be markets that fall outside of those deemed to have substantially equivalent reporting standards that would be required to be reported on a dual sided basis.  

Braga points out that BNP Paribas, as a global player, has the capability to assist local funds  trustees in meeting and monitoring their local and global counterparty reporting obligations. 

BNP Paribas product manager, fund services Australia, Josephine Maioranad, described the company’s offering as an end-to-end solution to meet the new regulatory requirement.”  

The requirement, which comes into effect on 12 October 2015, includes OTC derivatives as well as forward foreign exchange (FX) and associated hedging and overlays which are required to be reported.